Saint Louis as New Rome: the social science of building a catholic city.

[Transcript of a talk I gave at Communio, St. Louis Young Adults. Great crowd and conversation.]

Thank you for the introduction. Events like these are a public service to the community. Those who put them together do not get the rewards of their effects. So any value we get from each other’s company tonight, we have Adam at the bar, Garrison for the mic, and Father Rennier for the invite to thank. One weird way to summarize my talk would be as a call for a lot more creative conviviality.

I spend my time deliberately studying economics, writing philosophy and poetry, and practicing math. I see my role as being as informed as possible about the dismal science of institutions, education, policy, and urban growth as well as literature, arts, and science, so that I can use and share this information with others as a Proud Dilettante.

In addition to running JPII, teaching high school classes, and being a husband and dad, I dream of a St. Louis Renaissance. St. Louis has been called The Rome of the West, and it was once-upon-a-time a first-rate city. It is a good city today, and I love it. It could be even better.

Now a lot of these ideas I am testing out. And so what I offer is not a clear answer: do this and Saint Louis will become great, all problems will disappear, and you will feel happy and fulfilled and no longer have bad breath. I don’t have an answer like that. But I do have several useful tools for thinking about metropolitan life that I think will be most useful to you. And allow us to have a very good discussion afterwards.

To start let’s talk about the city. What is the modern city all about?

You want the simple answer? culture and dating markets. If you are not interested in either of those, then the city isn’t for you. If you win in the dating market and don’t care about culture you will likely leave the city, broadly conceived, when children start coming along.

And maybe that’s your plan. You come to Communio, you go to lots of other events, meet people, eventually a spouse, maybe find a better job, and then you leave for the deepest reaches of Lincoln County. There’s nothing wrong with that. But in this talk I am going to provide an alternative vision for Saint Louis that emphasizes the need for creating a thriving cultural zone across the metropolitan area.

So keeping in mind culture and dating markets, I will present three key ideas from social science, primarily economics, about how to make a culturally vibrant Catholic city.

Those three ideas are Culture First, Agglomeration Effects, and Signaling.

1.  Culture First

 Cities today are about people first and commerce second.

Many people think that cities exist for jobs by which they mean big employers, like Boeing, Barnes, and Mercy. This is a fundamental mistake: successful American cities are places where businesses get made or move to to take advantage of the high skilled people who are already there. Holding skills constant, businesses, especially factories, will move to places where the cost of land and labor is lowest. Most modern American businesses are not huge enterprises that require lots of workers, rather they are small firms that need a reliable supply of skilled workers, like skilled machinists, programmers, mapping experts, nurses, biotech researchers, office organizers, and interinstitution coordinators to name but a few in demand jobs in the Saint Louis area.

In the 19th century cities were built around transportation costs. Saint Louis is on the river, Detroit was on the lakes. But as transportation costs fell, and land and labor costs went up, the businesses left the cities, first moving to the suburbs, then leaving all together… this left cities quite vulnerable.

Ed Glaeser economist at Harvard has this to say in Triumph of the City: “Cities thrive when they have many small firms and skilled citizens. Detroit was once a buzzing beehive of small-scale interconnected inventors—Henry Ford was just one among many gifted entrepreneurs. But the extravagant success of Ford’s big idea destroyed that older, more innovative city. Detroit’s twentieth-century growth brought hundreds of thousands of less-well-educated workers to vast factories, which became fortresses apart from the city and the world. While industrial diversity, entrepreneurship, and education lead to innovation, the Detroit model led to urban decline. The age of the industrial city is over.”

Today, geography counts for very little. To quote Dune, “Place is only place.” People are everything. So the question becomes what induces people to gather in one place? I see it as culture, beauty, fun, weather, desirable social ties, and yes, dating opportunities. Or as Californian poet Robinson Jeffers says, “Music and religion, honor and mirth, // renew life’s lost enchantments.”

If you build these, you attract young, energetic, quirky, intelligent people, yourselves. Firms will follow in your wake. If I am right, then the causal arrow is from culture to economic growth, meaning that the core units that makes for a successful city are community and creativity: economic growth, career opportunities, and, most importantly, more cultural investment follow from them.

Cities are about people first and commerce second. This brings us to the second economic idea:

2.   Agglomeration effects. Agglomeration is a very ugly word; sounds like an ingredient in Jello, but it means the effect of having an increasing amount of something.

The idea of agglomeration effects in economics is that thirty people are not merely thirty times as productive as one person. They are often many more times as productive, because the thirty people learn from and are encouraged by one another. Take the example of prayer from Saint Louis de Montfort in The Secret of the Rosary: “Somebody who says his Rosary alone only gains the merit of one Rosary, but if he says it together with thirty other people, he gains the merit of thirty Rosaries. This is the law of public prayer.”

This idea that grace is greater in public gatherings is a distinctly Catholic one. But it is also found in economics in the guise of agglomeration effects.

Alfred Marshall’s 1890 Principles of Economics describes agglomeration in loving detail:

When a [community] has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same [mode of existence] get from near neighbourhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. 

The idea is that creative communities beget a creative, community-minded atmosphere, and trying deliberately to improve ourselves and each other through acts of community will make a great and desirable city. I think we could be doing a lot on this front.

Community is the opposite of the atomization and excessive individualization, which plagues modern American society. Robert Putnam’s book Bowling Alone outlines how American civil institutions and groups of the sort we need have progressively declined since the 1950s. The cities that are doing well today are benefiting from agglomeration effects, and those that will do well in the future will do so because they have found ways to foster the sorts of communities that create these effects.

But it does not take an army to reverse trends or change trajectory. Nassim Taleb, the pugnacious philosopher of economic uncertainty offers this note in his book Skin in the Game: “The entire growth of society, whether economic or moral, comes from a small number of people… Society doesn’t evolve by consensus, voting, majority, committees, verbose meeting, academic conferences, and polling; only a few people suffice to disproportionately move the needle.”

Renaissance Florence had a population of only 50,000 people; it only took a couple of committed workshops to initiate something special.

These people, people who move the needle, will be part of a network stubbornly committed to sharing and building culture and solving problems that arise when trying build a more substantial, beautiful, and creative Saint Louis.

Agglomeration effects create exponential creativity, which brings us to idea three.

3.       Don’t “sell” people on your creative ideas, signal your ideals.

If you are at all like me, selling people on stuff can seem kind of banal, venal, or inauthentic. What could be worse than cold call telemarketing? Trying to convince people who do not want or need what you have to offer is a waste of your time and theirs.  However, everyone wants to be delighted and to find their niche, so the problem is how to connect people to those for whom they have an affinity but don’t know it yet?

The key is signaling and selection effects.

Signaling Theory for economists is all about sacramentals. Those outward signs that ought to positively correlate with inner dispositions. A yellow-banded poison dart frog is jet black with neon yellow stripes; it looks poisonous because it is poisonous. It is sending out nature’s amphibious “Leave me alone” signal. On the other hand, at Urban Chestnut the plain, wooden, distraction-free, mead-hall benches, practically sing out “come, sit down, and have a conversation with friends.”

Groucho Marx once said, “I don’t want to be part of any club that’d have a guy like me as a member.” Groucho’s acceptance into the club would signal low enough club quality that he himself wouldn’t want to join.  Whatever it is you are trying to build, whatever peers you are trying to attract, making sure you are sending out the signals which will attract your people is the first step to overcoming alienation and atomization, and the first step to leveraging the interconnected urban environment to attract the people who will like what you have to offer. So first comes the signal. We fire off the bat-signal into the night sky and see who shows up, having faith that those who arrive are the ones God wanted to show up. 

A selection effect means that the people who are attracted to you and your creative group are not random but rather people who are inclined to what you have to offer, people compatible with your mission who had been stumbling along the edge of your social network, seeking just such an environment before they saw your bat-signal.

There are many ways to signal. The choices of how we construct our physical environment signals community values. A park with filled with children playing games doesn’t exist without local children, a safe neighborhood, and people who devote resources to upkeep. The art in our house, the design of our streets, our choice of public music, and the tabs on our computer, signal our priorities and reveal of our preferences.

The best signals are not loud the way a commercial is, but they are discoverable. Like how a Decemberists album shirt says more about you than if you simply said you liked the Decemberists. Even a shirt can lead to people approaching you because the external signals an interior disposition.

Self-selection requires a discoverable signal.

Discoverability is a technical term in social science, but it is like the “light hidden under a bushel principle.” It is a measure of the possibility for others to discover what you have to offer. If one builds the signals alongside the community, one creates discoverability. By sending off the right signals people will know who we are and what we are about. When they search online or even see St. Louis in the media, the same signals of a rich inner core may start to bleed through.

And that’s idea number three. Good signaling allows for self-selection.

Once a subculture’s signal and substance properly rub together, lightning strikes the frozen mountain of creativity; a cascade of graceful snow begins to descend. Agglomeration effects create an accelerating avalanche, and thus the signal becomes even stronger, so that even from many miles away the sight and sound of this cascade resonates through the valleys.

And those are the first three ideas which I think we can take with us for envisioning St. Louis as New Rome: 1. Culture comes first, 2. Agglomeration effects create exponential productivity, and 3. Signals allow for self-selection. Perhaps, next time, we will discuss where gladiator fights fit in to this New Rome idea.

One last takeaway is that a vibrant, distinctively Catholic culture in Saint Louis requires intentional effort. And we’ll talk more about how to do it in Q&A, though, as you know, I’m working on the school and education front. Thank you very much.

Book Dump 2021

I dived into a lot of books in 2021, more than ever. But finished only a few. Here are my favorite and most recommended books from the year, followed up by a fairly complete and ridiculously long list of books I spent a substantial amount time with.

My favorite and most recommended books of 2021.

Pity the Beautiful by Dana Gioia. Poetry, modern. Excellent.
The Way of Kings by Brandon Sanderson. Fantasy, long. Worth it.
The Model Thinker by Scott E Page. Math and epistemology. Phenomenal.
An Aristotelian Realist Philosophy of Mathematics by James Franklin. Math and philosophy. Excellent.
Economy and Nature in the Fourteenth Century by Joel Kaye. Economics, medieval philosophy, history, and Latin. What could be better?
The Wars of the Roses by Gillingham. I checked out every book on The Wars of the Roses; this is one is clearly the best written, even if a little more out of date. When history is well written I fall in love again. Highly recommended.
The History of Chemistry by Bernadette Bensaude-Vincent and Isabelle Stengers. This is the best history of chemistry in print, and there is no coincidence that it is a translation from French.
Talmud: from Classics of Western Spirituality Series. The Classics of Western Spirituality is hit or miss frequently, but I am enjoying the the selections from the Talmud here.

Below are all the books from 2021 by category.

Fiction:

  1. Moby Dick by Herman Melville
  2. The Napoleon of Nottinghill by G.K. Chesterton
  3. The Ship of Theseus by V. Straka
  4. Pity the Beautiful by Dana Gioia
  5. Parable of the Talents by Octavia Butler
  6. The Way of Kings by Brandon Sanderson
  7. Cenodoxus by Jacob Bidermann
  8. The Golden Country by Shusako Endo
  9. Project Hail Mary by Andy Weir

Philosophy and Social Science

  1. The Model Thinker by Scott E Page
  2. On Commerce, by David Hume
  3. The Use of Knowledge in Society, F. Hayek
  4. The Wealth of Nations Book I by Adam Smith
  5. Protagoras by Plato
  6. Charter schools and their Enemies by Thomas Sowell.
  7. Universal Economics by Armen Alchian (incomplete)
  8. An Aristotelian Realist Philosophy of Mathematics by James Franklin
  9. Saint Ignatius’ Idea of a Jesuit University by Ganss
  10. Economy and Nature in the 14th Century by Joel Kaye
  11. The Interests and the Passions: Political Arguments for Capitalism before its Triumph by A. O. Hirschman
  12. Capitalism and Freedom by Milton Friedman
  13. Open Borders: the Science and Ethics of Immigration by Bryan Caplan and Zach Wienersmith
  14. Range: Why Generalists Triumph in a Specialized World by David Epstein
  15. The Cult of Smart: How our Broken Education System Perpetuates Injustice by Frederick deBoeur
  16. The Case Against Education: Why the Education System is a Waste of Time and Money by Bryan Caplan
  17. Jesuit Education in Light of Modern Educational Problems by Shwikerath
  18. 10% Less Democracy, Why You Should Trust Elites a Little More and the Masses a Little Less By Garett Jones.

History

  1. Viking-age War Fleets: Ship-Building, Resource Management in Maritime Warfare in 11th century Denmark by Morten Raven
  2. Qumran in Context reassessing in the archaeological evidence by Yizhar Hirschfeld
  3. The Wars of the Roses by Gillingham
  4. Book Wars: the Digital Revolution in Publishing by John B. Thompson
  5. Battlegrounds by H. R. McMaster
  6. Keaton by Tom Dardis
  7. The Letters of Alcuin by Rolph Barrows 1909
  8. Kissinger: The Idealist by Niall Ferguson 

STEM

  1. The History of Chemistry by Bernadette Bensaude-Vincent and Isabelle Stengers
  2. Calculus for the Applied, Life, and Social Sciences
  3. Introduction to Chemistry by John D. Mays
  4. The Richness of Life the Selected Writings of Stephen J. Gould
  5. The Double Helix: a Personal Account of the Discovery of the Structure of DNA by James D Watson.
  6. Biotechnology 101 by Brian Robert Shmaefsky
  7. Vectors and their Applications by Anthony Pettifrezzo
  8. The Molecular Biology of the Cell by various authors (sc. Not all)

Religion

  1. Jesuits: A Multibiography
  2. Decreation the End of all Things by Paul Griffiths
  3. The Life of Brother Jordan of Saxony by anonymous
  4. Super Boethius de Trinitate by Thomas Aquinas
  5. The Spiritual Exercises of St Ignatius of Loyola
  6. A Rabbi Talks With Jesus by Jacob Neusner  (incomplete)
  7. Talmud Classics of Western Spirituality Series


A Liberal Arts Approach to Economics

[This letter is part of the Little Letter Republic, a project whose purpose is to build community in St. Louis and beyond.]

Dear Nate,

Our conversation the other night provoked me to want to explain more how I teach economics. I have done two things this semester which make my economics class different from the run-of-the-mill class (not that the run-of-the-mill economics class is bad; even normie econ is pretty grand!).

Having a different approach, means more than having a different philosophy while following the old motions. It means truly different tactics. My overarching goal in teaching economics is not to teach students about financial flows, but to teach students about human choice. In this way, my outlook is broader, more humanistic, and less focused on the mathematics and more on the decision algorithms from which the mathematics is abstracted and given meaning. The math is important, but I care first and foremost about introducing the economic patterns which motivate the invention of mathematical insights.

Our standard curriculum consists of economics by McConnell, Brue, and Flynn and Marginal Revolution University videos and questions. But since we have academic freedom, we are not forcing ourselves in a speed run cram semester-long cram session to complete the entire AP curriculum. Instead, we have taken two high consequence detours. Likely a few more will follow.

The first is in expected value theory. What’s the value of this? Firstly, to think about just the simple application of algebra to normal life choices and situations. Secondly, to see that one can incorporate risk into one’s thinking about choices, and thirdly to pass on a surprisingly simple yet powerful and important mode for thinking through decisions. We calculated how many people you would want on a road trip to Juneau for cost sharing to be worth it, how to calculate the expected value of a military strike, and what the expected value of different driving habits are.

In morality, such a method is useful too. When deploying the principal of double-effect in moral decision-making after all the major hurdles have been crossed the governing issue of moral action remains prudence, to take proportional measures to achieve our goals in the face of uncertainty.  Expected value along with marginal thinking and causal diagrams (discussion for another day), I think should become standard equipment in the category of prudential thinking, which means I am also happily committed to a theory of virtue which requires using tools like these.

The second difference is the way I allow international trade to alter the course. From international trade we quickly run into issues of globalization and automation. MRU has a little curriculum on the topic called Globalization, Robots, and You, an essentially depressing look at how difficult it is to compete in a globalized and automated world. I noticed as the students worked through the ideas, they both made insights and at the same time felt somewhat powerless. As much as I like the lessons, they leave something to be desired: an idea of what civilization is for and how to offer a unique contribution. On uniqueness, we talked about the combinatorics. If there are 500 skills and you possess three without being the best at any one, you can still quite easily become the best person who has that set of three skills. (500*499*498).

I then offered the students another way of thinking: two articles from 80,000 Hours on high-impact careers and career stages. And then we close with a self-assessment “flower exercise” from What Color is Your Parachute which I think forces the students to engage with their own individual preferences in the context of trying to both do good (vis-à-vis culture) and do well (vis-à-vis civilization).

Then as we dive into discussions on labor economics, the students engage the questions from a place of curiosity and personal interest.

What I’ve outlined in brief is my liberal arts approach to economics education so far: an emphasis on passing on those habits of thought and intellectual tools which make for personally free and moral characters. Some people shy away from discussion of the moral import of education. I embrace it. Intelligence must meet action, and voluntary action must be directed towards good ends.

Letter on Culture and Context

[This letter is part of the Little Letter Republic, a project whose purpose is to build community in St. Louis and beyond.]

Dear Nilay,

You asked about “Context is that which is scarce.”

In our last conversation you expressed mild shock when I said that none of my students and almost none of their parents know what a private equity market is. So, consider this example: I want to explain to a high school student what an equity market is. The student’s parents and family neither run businesses nor engage in any active investing, nor do their parents’ friends. From the student’s perspective there are jobs which pay money and there are places to which one goes to spend that money, and that little model, for them, is the economy. Notions like a funding round, shares, ownership, ROI, and public versus private markets are foreign concepts. But more importantly, even if they are explained, they are quickly forgotten because the concepts do not map onto the student’s experience of reality. To bring a student from ignorance to starting see how this works would require knowing one or several people whose picture of reality is formed by this other context. Such a personal network would then be adjacent to their own, and they could quickly add any new information I provided to their map of reality.

If I want to convince a student that starting their own business is something to seriously consider, their soul must grasp how this could work, but the soul can only with difficulty grasp what the senses haven’t experienced.

Consider another example found in “communities of practice.” What is the best way to become good at creating software back-end architecture? Reading a book? Certainly not, for a book cannot span all eventualities and quirks. For the most part, it seems, the best way to become good at something is to work on a problem and find people who have run into the same issues as you and talk with them or read their chats. Then, when you engage in conversation, they understand the context, or the context is shared enough that they grok the problem you describe.

A community engaged in similar practices encounters similar problems, but one cannot understand the problems or their possible solutions if one lacks the context to understand the problem in the first place.

When I dip into a work of philosophy, I can become gripped and absorbed into the text when the author is exploring a series of questions that I myself have contemplated. My “philosophical literacy” helps me see the point quickly about why a particular argument or line of inquiry matters. When I know what matters I am able to gain understanding. One needs cultural literacy to grasp the significance of any fact.

The point here is that knowledge is not a set of statements outside the mind but understanding within our intelligence about what matters and why.

We live in the information age, but it’s context that is scarce.

Here’s a trivial example. Let’s say I have had a fever for a few days, I text you, “I feel like Raskolnikov.” The information contained in that statement can only be unlocked if one has the cultural passkey, knowledge of Crime and Punishment. The most difficult part of this idea that the scarcity of context is so ubiquitous that we hardly notice the phenomenon, except by example or the experience of total confusion.

If I had to explain to my mom what I have been thinking about recently, it would take many hours of discussion before we were on the same page. The implication is that it is very hard to induct people into one’s own thought and problems unless they already share significant amounts of context with you. Nonetheless, my mother and I share other things, and so can connect on those.

There is a tragic loneliness in the scarcity of context. If I have something great to offer others, but they can’t understand it, then I will languish in obscurity. Sometimes I think about the people, the websites, the communities that I would love, that I know exist out there, but that I cannot find. I could wait for someone to link me there. But the human person is not a passive receptacle of experience, but rather a creator of context, a crafter of relationships and worlds. And so whenever we interact and build something together, we are creating context.

I hope some of that makes sense.

Yours sincerely,

Verses on Shipping

There’s a law or regulation

Near every U.S. dockyard station

That containers, stacked up to nine

On global ocean shipping lines,

May on the lots where man can see

Be only stacked up two or three.

For the sight of such a shipping tower

Causes residents to fret and glower.

But as containers come gliding in,

Those that are out, can’t get in,

And those that are in, can’t get out

Of dockyards or harbors. No turnabout.

 Oh the increasing traffic jam,

Miles wide, you understand!

But at least we residents still have the might,

To keep containers out sight!

Responses to “Contra ‘New Polity’ on Capitalism”

[These two letters written to me are part of the Little Letter Republic, a project whose purpose is to build community in St. Louis and beyond. I did not write them, and thus do not necessarily agree with everything said. I post it because them because they worth engaging with. I am always accepting letters. These are in response to “Contra ‘New Polity’ on Capitalism”.]

Hi Sebastian,

I did take a look at your letter.  It was a few days ago, but I do have a few general thoughts.  You are absolutely right to question this imagination of medieval Catholic ideas on exchange.  Virtually all serious research in this area presents a very different understanding, but the idealization persists.  On the other hand, while you cite real texts in support of your counter position, I think you go too far in the direction of imagining an understanding that can be labeled “pro-capitalist.”   I’m afraid your position comes off looking tendentious as well.  There are texts in both Albert and Thomas (and others) that indicate their real concern for a personalized ethics, and in Thomas, a real understanding that relying simply on market price relieves the exchanger of taking the necessary moral responsibility for his actions.  (I believe I make this point in E&N).  I think you need to bring this side out as well.  What I find most interesting is that even if scholastic authors question the simple assent to market price, they all recognize that there is such a thing, and they all recognize that even if not the perfect personal solution, it provides the best guide to the question of economic value.  That’s to say that at least from the time of Albert (and evidence has been found that takes this back to the 12th century), there is a clear understanding of the existence of “market price” and the elements contributing to everyday price formation, and that this price can be seen as “just” (but see below).  I’ve only found one who speaks of economic value in everyday exchange as properly determined by primarily personal decision based on the needs of the other.

Two other points I think important. 

The value that  Catholic thinkers in this period allow to the Common Good is exceptional.  I stress this even more in my following book, A History of Balance, and I think you might like to take a look at my first 2 chapters.   This informs their “economic” thinking in a way that has surface similarities with the capitalist imagination, but is different in important respects as well.

I think both the authors you critique and you yourself should have a clearer understanding of Thomas’ attitudes toward “justice” with a small j, i.e. what is permissible by law.  I discuss this, too, in E&N.  I think you’ll find that it is a relatively low bar: designed to facilitate the functioning of the community, and thus many things are permitted by the “justice” of human law that are far below what divine law and justice require.  So it would be good, I think, to point to this distinction.

I commend your desire to bring scholarship into this discussion.

Cheers,

Joel

—–

Dear Sebastian,

What a feisty, pugnacious essay! I enjoyed it immensely, even if it took up my whole lunch hour. I wrote down some notes in agreement or disagreement with each of your 6 points. I have to say, though, I agree with the general tone of your essay. Granted, the burden of proof is on New Polity, so your objections can be sound without the implicit foundations of your arguments correct. In general, ironically, I found your arguments in need of more empirical data and less generalization–just like your beef with New Polity, right! I think the moral argument needs to be more nuanced. 

1) Alienation and Mechanization: First, what you say about mechanisms of economy is spot on. They’ve always existed, and having more intricate ones with more moving parts in the digital world is not bad, nor is it different. But you’re too dismissive of this point: where do you draw the line? How much alienation is too much, or at what point does a mechanism produce alienation that is definitively immoral?


For instance, the mechanisms of a global economy, if not immoral themselves, can certainly lead to immoral behavior, can certainly encourage it. People would be a lot less likely to buy Nike shoes, for instance, if their factories were in our own cities instead of Indonesia. That’s not at all a denunciation of this mechanism per se; I’m just pointing out that not all mechanisms are equal. Just because they’ve been around since time immemorial doesn’t mean some don’t encourage things like alienation. Of course NP’s attitude needs to be more nuanced, but it shouldn’t be dismissed outright. Some alienation is perhaps necessary, but at a certain point I think it’s reasonable to say that certain mechanisms lead to a level of alienation that is unacceptable.


2) Argument of Arbitrage: again, I agree completely that arbitrage is not only not immoral, but a good to be fostered, and a way of creating equilibrium. That’s fair. I especially appreciate the pre-Revolutionary France example. But again, just because arbitrage as a concept is praiseworthy doesn’t mean that it is in all its instances. Again, your refutation is legit: but I would be more interested in a positive argument for how to have ethical arbitrage. Surely at some point my buying and reselling of goods ceases to be itself good and praiseworthy. The crux of the question, I would argue (and NP seems to agree) is the common good. 


Take the crash of the housing market for example (based entirely from my watching of The Big Short). Those investors were gaining capital by purchasing bad debt, and in gaining a prophet in this way, they ended up devaluing the market and causing an economic collapse. Granted, this problem can be solved by tweaking the mechanisms of buying and selling; you don’t have to overhaul the system and eliminate the value of debt. But again, your guiding star has to be the common good, which you don’t seem to acknowledge.


3) The theorist-phenomenon fallacy (love the name!). Once again, I find myself in complete agreement that we, self righteous academic Catholics tend to way overvalue abstract ideas. I usually commit the fallacy three or four times before breakfast. But don’t go to the opposite extreme! Don’t you think that ideas, ideologies, philosophical principles gradually inform the way a people will think, act, consider? De Tocqueville makes an entire thesis of this in his visit to America. Nobody here has read Descartes, he writes, but nowhere in the world are his ideas more implemented. Accordingly, I don’t think it’s unreasonable to say, quite simply: self-interest is the guiding principle of this economy, therefore people tend to act in this way first, before considering service to others secondarily. Is the basis of our economy not self interest? I would need to see this demonstrated.


4) Monopolists: you are very dismissive of the cries against big corporations destroying local businesses, etc. A year or two ago Amazon informed in a commercial that they really aren’t against the little guy. They showed a video clip of a small business owner smiling because he worked with Amazon, so it must be true! Your argument feels a little like this also. Again, I would like to see empirical evidence that either a) these monopolies are not, in fact, destructive to local business, or b) local business and economy is not in itself a good worth preserving. 


5) Index funds: I enjoyed this section most of all. I agree with you that the fact that they’re impersonal is not bad (a sentence which I hope I’ll never utter again in any context!!). But the lack of autonomy is a serious problem. I tried to do a quick search to see what percentage of an average portfolio is going into the porn industry, but I couldn’t find good numbers. But I would like that kind of statistical info before giving my approval. That’s why we’ve been investing with Ave Maria Funds. Again, I agree with you that index funds are not inherently immoral, but that doesn’t make them inherently good either.


Which leads to my next point. Albert and Aquinas, writing 800 years ago, are pro market price. That’s fine, but you fail to acknowledge the ways the market is different now than it was in their time. The index funds are a prime example: capital is considerably more fungible now than it was in their time, leading to issues that they did not anticipate. Should an item be sold at market price if the sellers have established total control of the market? Didn’t that hedge fund this winter try to pull this, and artificially lower the market price of Game Stock, before they were foiled by Reditters? But the point is, the market price cannot remain the only consideration regarding morality when investors have gained so much more control over how these things are set. All the ways capital is different from medieval times would have to be considered before we can accept Aquinas and Albert’s teachings out of hand. 

John

Contra “New Polity” on Capitalism

The intersection of economics and ethics should be an area of fruitful study and inquiry, one in which we develop new tools for living freer, more prosperous, more fulfilled lives. One such attempt to think in this space and develop an outlook somehow manages to be incorrect in almost every, single particular. I spent several weeks trying to figure out how the gentlemen at New Polity have been able to err so systematically about economics and a vision for a “Catholic” economic order based on “virtue and community instead of the individual and self-interest.”

New Polity, a Catholic Utopian political project set up in the brambles of Steubenville, Ohio, “aims to deconstruct the keywords and categories of liberalism and reconstruct them according to the logic of Christianity.” Their podcast is a humorous, warm, and somewhat grave exposition of their economic worldview. It is even inspiring, if one can get past a few trifling details, such as that their philosophical history is missing pieces, their account of standard economics is “idiosyncratic”, and their empirical claims are misleading.

Nonetheless, they speak with a Catholic vocabulary, which is alluring, and they are obviously good people of upright heart and good humor. But as for their actual ideas, they are a dangerous siren song for disaffected Christians, offering a retreat from reality in the name of virtue. I worry deeply about their project, not only because I think they make important mistakes, but it seems as though they lack any sufficiently strong challengers to make them sharper and more useful and less wrong. After many hours of listening to their podcasts and reading some of the general New Polity articles, I have boiled down their insights into six core ideas (six, the number of the working man!), all of which are mistaken to various significant degrees.

I am going to be pretty harsh here, so let me reiterate. Marc Barnes and Jacob Imam are really, wonderful people. Totally sincere in what they say and without any desire except for all good things to be subsumed within that Great Good from which all good things first flowed – also jokes. Their joke game is better than mine. I made a New Year’s Resolution to be funnier, and it hasn’t really worked out. But Marc Barnes has been writing witty Catholic blog posts since like 2010, and his music rocks. In fact, listening to his album should be top priority for you, dear reader, right after you read this essay.

I will send this essay to Jacob and Marc, so that they have a chance to respond, and if they feel I am misrepresenting their claims, I want to be able to correct myself. And sorry in advance to all the other folks at New Polity whom I am overlooking, like Andrew, I just only really listened to the episodes that had Marc and Jacob on them, so I’m focusing on them. Ultimately though, my goal is not merely to critique. I am deeply devoted to the line of inquiry that connects morality and economics. I teach a course on each, and I believe getting the fundamentals right and sharing those with others will improve their lives and ultimate happiness by giving us more options on how to improve our society. Getting the fundamentals wrong makes all further inquiry vain. And being too cavalier about the prescriptions frustrates the goal of the good life. I want the New Polity project to be successful and true and beautiful!

Idea number one.

  • The Medieval notion of the just price is based upon the buyer and seller trying to fulfill each other’s individual needs within a personal virtuous transaction.

According to New Polity, the just price concerns individual needs, the needs of the seller to cover costs and take care of his own affairs, and the needs of buyer to secure what is necessary for his livelihood and affairs. For a price to be just, the seller doesn’t sell for more than he needs, and the buyer pays at least enough to cover costs and take care of the seller. In this story the purpose of bargaining and market transactions is not to get the best deal for oneself, but to find out what the other person needs at an individual level and exchange with respect to those individual needs.

Descriptively, this is not how medieval people set prices, nor was this vision of the just price a common theological prescription or the only one at the time. I don’t know where they get their particular version of this idea. The provenance of this idiosyncratic definition seems to be their own creation, based upon the values of localism, conversationism (a term I just made up), and an assumption of abundance, and moral concerns about profit.

Indicative of the wider thinking of New Polity, here we enter a mental land which valorizes medieval Europe for capacities it didn’t have, in this case, that the seller and buyer of item knew each other and thus were more likely sell items at a price that was pleasant for that individual. And even if they didn’t do this in practice, Jacob and Marc claim (or perhaps assume) that a specifically personal transaction was the gold standard of economic action held by the best thinkers of the day.

And speaking of best thinkers of the day, let’s hit up Saint Albert the Great for his explanation of the just price to see if this is true.

“Money is a quantity that measures a common quality of all things, that quality is found in the use and the need of the community; thus, money is able to be a common measure for all things, which compare things among other items of a certain value,” [1] (translation mine, but it’s not exactly literal because the Latin here makes for terrible English).

“However, the just price is the one which according to the estimation of the market of that particular time is able to be had for the thing sold,” [2] (translation mine).

Notice the emphasis on community, estimation, and contingencies of the market! Albert thought the going market price was the just price. It is shocking to me, too. And should give us pause that the early 13th century already had people, brilliant outliers, perhaps, who were quite advanced, or if you don’t like the value-laden term, “modern” in their economic analysis. Both of these statements of Albert contradict core New Polity principles. Albert thinks 1) Money was founded to allow people who don’t know each other to trade, i.e. it concerns “alienation,” (This is not an idea found in the medieval corpus, as far as I know. Aristotle says the purpose of money is to serve a common measure for diverse objects, allowing us to compare houses to shoes in terms of cost, and that is what Albert is building off of). 2) Value of an item is based upon the production costs and what use buyer can make of it for his salvation. But for Albert, value is also contingent upon market circumstances that occur beyond the individuals making the transaction. It’s relative to time and place, not merely costs of production and needs of the individual.

“Okay, one example! Sure, Sebastian…” Fine, I say. Let’s turn then to the OG fat cat of Catholic philosophy Saint Thomas. While Thomas’ views on the just price are less clear and more contested than Albert’s [3], even he admits that selling high when there is scarcity is justified, even if new shipments will reduce the price shortly. He considers the case of a merchant who knows that a new shipment is coming of some good.

“Whence a vendor who sells according to the price he finds in the market it seems does not act contrary to justice, if he does not reveal that which is coming. However, if he should reveal this information or lower his prices, it would be an abundance of virtue, although it should seem outside of the duty of justice,” [4] (translation mine).

This is not something New Polity would admit into their “Christian economy”. For them, to speak of the justice of selling at a significantly higher price than the costs of production would be nonsensical. But Aquinas, although he shares many of the concerns of New Polity, is decidedly not in their camp, though he shares their concern in other places about a rupture in economics between what is natural and what is good.

So Albert conceived the just price as something practically equivalent to the equilibrium price of supply and demand, and Thomas while more circumspect, still connects the idea of exchange to scarcity. Such views of market exchange were developed further throughout the Middle Ages, by other thinkers, thinkers who have similar theological and moral concerns as our New Polity friends. The fact that medieval philosophers and theologians shared views strikingly similar to the mainstream economics profession should call into question some the revisionist economic thinking that has crept into much Catholic social philosophy recently, especially this so-called “postliberal” stuff which purports to be inspired by a medieval ideal.

Thus, I think the definition of the just price offered by our New Polity friends merely presents some pious fiction based upon wishful thinking for a world motivated by a theology of personal encounter and easy liberality due to a lack of scarcity. But in the words of economist Armen Alchian, “Since the discouraging fiasco in the Garden of Eden, all the world has been a place conspicuous in its scarcity of resources, contributing heavily to an abundance of various sorrows and sins,” [5].

Amidst the glorification of medieval thought, sometimes stylized facts worm their way in. And that brings us to idea number two.

  • Using mechanisms for determining price and value dehumanize us by removing the need for personal virtue from our account of the good society.

They are worried a lot by alienation, by external mechanisms that we can’t shape dominating our lives, and humans losing our capacity for virtue as we lose our autonomy within the greater system.

(My baser self says, “When I raised concerns like this in college, I was a wise and humane thinker, boldly questioning the trajectory of society, but when New Polity raises this concern, they are foolish luddites who rely on armchair philosophy and ignore empirical reality.”)

I no longer get the intuitions behind this claim. In my collegiate youth, I made it because I didn’t understand what half the words in the sentence really meant. In truth, I can’t really remember why I thought that, and I don’t know how to reconstruct that mind-space. I didn’t know what different types of mechanisms were, or why they mattered. I didn’t know what society was, or how to think about autonomy, or how they actually functioned. I was, frankly, an idiot. But why do these gentlemen make this claim? What does it mean to them?

First of all, taken at face value, the original claim is absurd, even bargaining and bartering is a mechanism. Courts are a mechanism. Letter writing is a mechanism for communication. So what does Marc mean? Can anyone explain what they are talking about? Well, everyone admits that producers need to cover their costs and total upkeep, so whatever method we use to figure and calculate that is a mechanism. Is there something dehumanizing about counting and accounting? Math-phobic theologians and social philosophers have always had a vendetta against Plato’s injunction to learn Geometry, even more so are they suspicious of accounting and economic models. This, of course, makes them poor judges of the use and abuse of models. Far easier is it to dehumanize and dismiss the mathematicians, than to learn their occult crafts. I am not saying that Jacob and Marc are making this error here. I frankly don’t know what they’re doing.

What I do know is that complex societies require supra-personal mechanisms to function and any honest and consistent attempt to function without them would put one back into a time before laws had to be written down.

Although, like a Spanish Man-of-War, NP makes a broadside attack against all mechanism, I suppose I should address their claims about the “mechanisms” for price setting and the “mechanisms” for determining value.

While Saint Albert and Saint Thomas and the following scholastic philosophers believe that aggregate behavior and relative scarcity can produce a just price, they never adopt a hard line against market mechanisms for prices the way New Polity does. New Polity is deeply worried that market failures and injustices are strong indicators that the majority of modern exchange is in fact morally deficient. They have never produced a sustained argument for this position as far as I know, but they suggest it very often.

In related news, error number three.

  • Arbitrage is exploitation. Interest is exploitation.

Arbitrage is not only NOT exploitation, it is oftentimes truly praiseworthy. Arbitrage creates value by moving goods from where there is less desire for them to places where there is more desire for them, until the costs are equal. This allows more people to partake in the good than otherwise would be free too. A flea market or garage sale where you sell old items is a type of arbitrage. Pawn shops deal in arbitrage. The distant merchant who buys low and sells high is only able to do such a thing because the low cost represents a low value placed on the item locally, and the profit he makes represents the high value placed on the item in some other location. As goods become more evenly dispersed, arbitrage opportunities close. If you look at the world today, most goods that travel well, like cell phones and spices cost the same everywhere precisely because there are no arbitrage opportunities left. This is great! It means that the price reflects the something very close to the average production cost everywhere and allows for the maximum number of people to benefit from that item. In general, this is a very good thing, Marc!

Let’s take it back to Aquinas’ example of the merchant who knows a new shipment of some good that he sells is about to hit the market. That merchant will try to sell as much as he can right now before the price drops. Notice that in Aquinas’ account it is implied that lower prices are good for the consumers, and the merchant’s desire to sell at the current price before the supply increases is not considered to be unjust. In a word, Aquinas does not assume these normal economic actions and reactions to be morally unjust. This brings us to arbitrage. The merchant who brings the new goods to market commits the good action of creating lower prices by increasing supply in a constrained market. If lowering one’s prices in anticipation of new goods coming to market was virtuous on the part of the original merchant, how much more praiseworthy is it that the new merchant is bringing the goods themselves to market?

The low price means that even the poorer person can obtain this good, so he or she may use it for their good and the good of their family, friends, community etc. If you care for this relatively poorer person being able to make use of goods, then arbitrage is generally praiseworthy!

But according to New Polity’s episode on prices, “A merchant starts with money, buys a product, sells the product and then is left with additional money… that is not okay.”

Consider 1780s France. Each county and duchy had its own import and export duties. This diminished arbitrage opportunity and kept production quite local. It was a localist dream! Except for the constant grain shortages, high prices, and local monopolies, which led to conspiracies that the crown was secretly hoarding grain, to civil unrest, and to… you get the picture. It’s one example, but I think it is salient and instructive. Allowing money and goods to flow to where they are most needed is generally helpful to people in their own estimation.

Marc might say that a merchant’s profit is not good for the merchant. But it is for the people he sells to. There is no one wronged here. And while Marc may want to object that the merchant’s disposition is bad for wanting to make a profit, I simply observe that the profit is only possible because of a service provided, and thus is not necessarily unjust.

Once I am granted the good of arbitrage, I will be able to make the basic story of interest sensible to the theologically scrupulous.

  • A Paraphrase: “Mises says that the economy must be based upon self-interest and scarcity. Hobbes says that the state must be based upon violence and scarcity, therefore our modern liberal state is based upon an anthropology of self-interest and violence to neighbor through the profit motive.”

To what shall I compare this mistake? Or what fallacy can we call it? The theorist-phenomenon fallacy, I will call it, a terrible fallacy. Watching what the economy actually does is how one should judge the economy. Knowledge of the economy comes from the senses, descriptions of what people do, not from philosophical works.

Error number four is very typical of over-blogged, post-empirical post-liberals, and so it is unfair to pick on Marc and Jacob for this one. New Polity combines a normal lack of economic insight with Catholic studiousness/infatuation with the history of ideas. For example, while Locke and Hobbes are important thinkers and theorists of political economy, their effect on the actual workings of our society approaches zero. Yet, when it comes to understanding economic theory, our New Polity hosts and writers put great weight on these philosophers as representative examples of what “capitalism” is all about.

  • Most businesses are monopolistic in price setting.

Empirically not true. Really what is happening here Marc and Jacob are just crying in frustration that we don’t live in a society where people are negotiating prices all the time. They do not like (attempted) equilibrium pricing. They feel they are powerless to oppose it. Ironically, one of the key texts for helping write this article, I purchased off Amazon… after negotiating for a better price from the private seller.

And furthermore, negotiation on prices is constant in our society, if one cares to look for it.

When New Polity describes the economy, the businesses they list are frequently big name consumer facing tech companies and other vogue villains, as though that is where all the value is in the economy. It’s a skewed picture.

(Unrelated: I tried to negotiate for a better price on YouTube Premium, and they didn’t get back to me. So I go without, because $12/month is just egregious!)

  • Putting money in index funds is unchristian and selfish.

By far New Polity’s take with the worst consequences for the individual, for families, and the common good is this one. But explaining why this claim is wrong in a way that is succinct and capable of moving the needle for Marc and Jacob is hard. Their two main concerns are lack of personal connection and lack of capital autonomy. Let’s take these objections one at a time.

Because index funds are impersonal your investments are not tied to investing in something or someone you know. This means that your money is not being used to benefit your community, but rather a diffuse unknown group of persons. Thus, investments become divorced from personal charity, so the thinking goes. I don’t think this is a very strong objection. Like the objection to mechanism before it, it’s too broad. If I accept it, then I wind up committed to all sorts of bizarre notions that forbid me from doing things that generally and systematically produce good, even if I don’t see it or know the people who benefit from it.

The other objection to blind investing complains that when one loses control over what one’s money is going towards, one is enabling some evils in society by providing material cooperation with evildoers or bad businesses which are not making the world a better place. At some margin, this is certainly true. But is indexing morally problematic? Is the financial sector mostly bad? I am not so cavalier.

What I will say is this, we should presume that most businesses provide positive value to society. The value businesses provide would not exist without investors and lenders, and so, on average, index funds are creating a lot of value – for individuals through returns, for businesses through financing their projects, for consumers by enabling those businesses to arbitrage opportunities, and for society as a whole through the growth in capital goods, which make this cycle of growth possible in the first place. Are they entrenching incumbents? Or buoying the size and inefficiencies of big businesses? Perhaps! It’s an empirical question I’d like to know more about.

But even though I think normal index funds are good, I do like value investing. Well, I like the idea of it. Matt Levine, my current and only heartthrob for finance news, has been tracking the growth of ESG investing (environment, sustainability, governance), that is, the growing number of investors who don’t only want shareholder value maximized by the company but are also interested and agitate for reforms in other non-pecuniary areas. Why would they do this? Because they are indexed! Investors own parts of lots of companies, and if one company is going around doing something bad for society or government stability or human reproduction or the environment or something, then that company is a liability to the entire portfolio of the world by making it less sustainable. Hence the recent story Matt wrote today about the shareholder complaint lodged against Facebook. A possible moral is that indexing allows us as a society to internalize the costs of the bad things all the companies do, because “bad things” makes the world worse and more volatile. Not that money isn’t being made off of vice, surely lots of dough is rolling in because of the intemperance, ignorance, and general failings of human nature. The world can still hum along despite quite a bit of vice, but when it gets too out of hand, finance sometimes can step in to take the longer view. It’s a weird world.

Is there a problem in the amount of money in index funds? Are there supply-side bottlenecks throughout our economy? Should we have a more “venture-capitally” world? Probably. I don’t know. It’s worth investigating. But any investigation into these problems is going to be a very empirical data-heavy endeavor far removed from armchair opining on John Locke. I will take a long bet that our world could be so much better and greater than it is today. But I think the innovations which will improve the current state of affairs will build from and transform the good that is already present, especially fundamental insights of mainstream economic theory, rather than some new “opt-in” polity born from whole cloth.

Conclusion

I think New Polity can do great things and create an inspiring message of how to be a Catholic in the modern economy. Right now, they are stuck in a scrupulous theological mode, which corrupts all the interesting analysis by lacing it with mistaken empirical claims, sloppy arguments, historical fiction, and missing engagement with the actual existing economics profession. Grace builds on nature. They are all grace with not enough substance to build on. I don’t think it would take much for them to break out of the silly presumptions common in their Catholic milieu; they just need to learn how to think like “bad economists” as well as “bad Catholics.”

[1] Kaye, 68. Albert 334b.
Sic ergo dicimus, quod si fiat mensuratio artificialium secundum esse suae speciei, non mensurantur omnia numismate, sed domus domo et sic de aliis. Si autem mensurantur quantum ad hoc accidens ipsorum, quod est appretiabile esse, secundum quod veniunt in usum et utilitatem communitatis, sic possunt habere omnia mensuram, quae sit certissimi pretii inter alia, quia hoc est dispositio mensurae.

I was successfully harassed, so I put the Latin in here, thanks Joe!

[2] Kaye, 76. Justum autem pretium est, quod secundum aestimationem fori illius temporis potest valere res vendita.

[3] Kaye, 96.

[4] Kaye, 97. Unde venditor qui vendit rem secundum pretium quod invenit non videter contra justitiam faere, si quod futurum est non exponat. Si tamen exponeret vel de pretio subtrahet, abundatiatoris esset virtutis; quamvis ad hoc non videatur teneri ex justitiae debito.

[5] Alchian, 1. This was written in English.

References

Joel Kaye, Economy and Nature in the Fourteenth Century: Money, Market Exchange, and the Emergence of Scientific Thought. 1998. The footnotes are mostly in Latin.

Armen Alchian, Universal Economics. 2011.

McConnell Brue and Flynn, economics, 2016. It’s the AP book I teach out of.

Marginal Revolution University. A great website for watching economics videos and learning the subject.

Why Economics and Probability Should be Part of Classical Education

Discussing prudence, St. Thomas Aquinas quotes St. Isidore of Seville, “A prudent man is one who sees as it were from afar, for his sight is keen, and he foresees the event of uncertainties.” Economics is the modern term for this ancient prudence, for the principles of economics allow us to foretell the likely consequences of an action, event, or law and then decide whether the prior action is desirable. Prudence, then, is our goal in such a class. This intellectual virtue empowers moral virtue to fulfill its ends.

When I was a kid, I had no interest in economics or money (except that one could use it to get things). I thought econ was for people obsessed with superficial stuff. By the time I was in high school, I had renounced superficial stuff and was trying to attain whatever high school me thought was wisdom, which turned out to be an exclusive focus on literature, poetry, and religion.

I was converted into an interest in economics when I learned about how incentives influence people’s behavior, and that people’s seemingly bad actions are more often unfortunate economic effects rather than deliberate maliciousness. People do what they think is good for themselves and those they care about by following incentives. In short, I learned not to jump to blaming individuals for the way things are and instead to think through what dynamics made things become the way they are. This study, just as the literature I love, reveals much about the tragedy of the human condition.

An economist as an economist studies how these games of exchange and choice work and how changes in the rules or environment will change behaviors of the players in the game. The ideal economist can foretell the effects of different actions, events, or laws with a high probability of being right.

The Armenian economist Alchian wrote, “What the economist can do with economic analysis is to deduce some of the consequences of a proposed act, presumably more accurately than a noneconomist. But to assess and appraise whether the consequences of the action are good or bad is, to the economist, forbidden fruit. Yet, like Adam, many economists eat of it.”

I have greatly enjoyed Alchian’s beautiful book Universal Economics from which I took this quotation, but no one is only an economist, and as sons and daughters of Adam, we need to learn how to appraise the likely consequences of an action AND judge whether the consequences are good or bad, for distinguishing good from evil is the most important thing for living a good life. I don’t know to what extent prudence can be taught, but I do know that the study of probability and economics lays the groundwork for wise decision making in personal, business, and political life.

If a classical education wishes to carry the torch of those liberal arts, which liberate people to know what is true and do what is good, then, strange as it may sound, the principles of economics and probability is not optional.